Procera Jumps 16%: Bulls Cheer Sustained Growth in Tough Market

By Tiernan Ray

One of the few bright spots amidst today’s selloff is networking vendor Procera Networks (PKT), which is up $3.30, or almost 16%, at $23.59, after the company last night beat Q3 estimates and reiterated a revenue view for the year in line with consensus.

Estimates are going up just slightly, while price targets seem to be staying fixed. The bulls on the stock seem to be encouraged by the company at least delivering on estimates in what has been a tough environment for networking infrastructure.

Pacific Crest’s Brent Bracelin reiterates an Outperform rating on the shares, and a $30 price target, writing that despite a “weak” macroeconomic environment, the company is on track for 40% revenue growth this year, “benefitting from a shift in spending priority” among carriers.

Bracelin raised his estimate for next year slightly by $80.5 million from $80 million, while reiterating a profit view of 62 cents. He keeps intact this year’s estimate for $62 million, while raising his EPS view to 50 cents from 45 cents.

Raymond James’s Simon Leopold reiterates an Outperform rating and a $26 price target, writing that “increased deferred revenue and an inflection point from its wireless vertical stand out positively.”

Leopold is heartened by what appears to be a migration of Procera’s technology for “deep-packet inspection” equipment into the wireless portion of telco networks from the traditional sales into wireline infrastructure:

The DPI market is one of the faster growing markets in the Communications Equipment space as service providers seek to intelligently manage networks. DPI technologies can help identify and prioritize traffic and apply policies accordingly, thus deferring expensive equipment purchases. The DPI market is expected to grow at a CAGR of 30% between 2011 and 2016 to reach $1.8 billion in 2016. Although lumpiness is a norm, the Wireless vertical reached a record 45% of sales vs. 14% last quarter and less than 5% in the year ago quarter, and may signal a favorable inflection point as this market begins to adopt DPI.

Loepold sticks with his revenue estimates of $62 million and $81 million this year and next, while raising this year’s profit estimate to 32 cents from 24 cents. For next year, he sees 41 cents.

Procera’s report hasn’t helped networking stocks too much today. Cisco Systems (CSCO) is off 28 cents, or 1.6%, at $17.20, while Juniper Networks (JNPR) is off 24 cents, or 1.4%, at $17.30. In contrast, shares of F5 Networks (FFIV) are up 41 cents, or 0.4%, at $88.08.

About Tech Trader Daily

Tech Trader Daily is a blog on technology investing written by Barron’s veteran Tiernan Ray. The blog provides news, analysis and original reporting on events important to investors in software, hardware, the Internet, telecommunications and related fields. Comments and tips can be sent to: techtraderdaily@barrons.com.